TDS payment has been made mandatory for the house rent exceeding INR 50,000 a year and this will applicable for a metropolitan city. The TDS need to be deducted by the rent payer on behalf of their landlord. This decision is the result of current government’s focus of widening the tax net but ultimately the rent payers have got an extra income tax payment compliance on them. A new section 194-IB has been proposed which prescribes that an HUF paying rent exceeding INR 50,000 must deduct a 5% of such payment as income tax. This provision is still under approval processing stage and will be effective only after get approved by the President of India. This amendment will be a new addition to the TDS payment guidelines and it is being expected to get in action by next financial year. Also, this proposal added that the tax must be deducted at the time of paying rent. In case, the rent payer is vacating the house in between a financial year, then this income tax payment must be deducted for the last month of tenancy or for the last month of the previous year. Whether the rent is being paid by cheque or cash or draft, the payment needs to be deducted at the time of payment by the payee. The deducted TDS payment need to be deposited only once a financial year by the taxpayer through a challan-cum-statement which is going to be release soon. However, relief is also announced in this proposal. The rent payer does not need to obtain a tax deduction account number (TAN) as it prescribed in Section 203A. also, the rent payer needs to deduct this income tax payment once a financial year. If the landlord does not provide his PAN number than the rent payer must deduct TDS at a rate of 20% but this deduction must not exceed the rent amount for the last month of the previous year or for the last month of tenancy whichever is suitable to that situation.
Also, the penalty has been prescribed in this proposal for non-compliance of this TDS payment rules. Non-compliances including failing to file TDS return or failing to deduct the amount while paying tax.
The penalties prescribed are:
The implication of Non-Deduction: an interest at a rate of 1 % per month of the tax will be penalized from the date on which such tax is deductible till the date of tax is deducted.
The implication of Non-Payment: an interest at a rate of 1.5 % per month of such income tax payment will be penalized from the date on which such tax is deductible till the date of tax being paid.
Fees for Late Filing of TDS return: a fee of INR 200 per day will be charged under section 234E from the due date of TDS statement furnishing to the date of TDS statement.
The penalty for failure to furnish TDS payment Return: The penalty can be anything between INR 10,000 and INR 1 lakh.